02/27/2018 09:00 AM FINANCE

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HOUSE FINANCE COMMITTEE
February 27, 2018
9:05 a.m.
9:05:18 AMCALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 9:05 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Les Gara, Vice-Chair
Representative Jason Grenn
Representative David Guttenberg
Representative Scott Kawasaki
Representative Dan Ortiz
Representative Lance Pruitt
Representative Steve Thompson
Representative Cathy Tilton
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Crystal Koeneman, Staff, Representative Sam Kito; Lacey
Sanders, Analyst, Legislative Finance Division; Timothy
Clark, Staff, Representative Bryce Edgmon; Sara Chambers,
Deputy Director, Division of Corporations, Business and
Professional Licensing, Department of Commerce, Community
and Economic Development; Kathie Wasserman, Executive
Director, Alaska Municipal League.
PRESENT VIA TELECONFERENCE
Erika McConnell, Director, Alcohol and Marijuana Control
Office, Department of Commerce, Community and Economic
Development; Susan Edwards, Finance Officer, Lake and
Peninsula Borough, King Salmon; Nathan Hill, Manager, Lake
and Peninsula Borough, King Salmon.
SUMMARYHB 96 TAXES;DEDUCTIONS;FEES;TAX STAMP DISCOUNT
CSHB 96(FIN) was REPORTED out of committee with a
"do pass" recommendation and with two new zero
fiscal notes from the Department of Commerce,
Community and Economic Development and one new
indeterminate fiscal note from the Department of
Revenue.
HB 267 RELEASE HUNTING/FISHING RECORDS TO MUNI
HB 267 was HEARD and HELD in committee for
further consideration.
HB 273 EXTEND: MARIJUANA CONTROL BOARD
HB 273 was REPORTED out of committee with a "do
pass" recommendation and with one new fiscal
impact note from the Department of Commerce,
Community and Economic Development.
Co-Chair Foster reviewed the meeting agenda.
HOUSE BILL NO. 96
"An Act amending the calculation of adjusted gross
income for purposes of the tax on gambling activities
aboard large passenger vessels; repealing a provision
allowing an investigation expense under the Alaska
Small Loans Act to be in place of a fee required under
the Alaska Business License Act; repealing the amount
that may be deducted from the tobacco excise tax to
cover the expense of accounting and filing for the
monthly tax return; repealing the discount on
cigarette tax stamps provided as compensation for
affixing the stamps to packages; and providing for an
effective date."
9:06:43 AM
Co-Chair Foster relayed there was one amendment to the
bill. He asked the sponsor and his staff to address the
committee.
REPRESENTATIVE STEVE THOMPSON, SPONSOR, thanked the
committee for noticing the effective dates of the bill and
preparing an amendment. He explained that the bill was
retroactive and needed to be brought up to current dates to
move forward properly. He detailed that the information in
the bill was sourced from the 2017 Indirect Expenditure
Report [published every two years by the Legislative
Finance Division]. He relayed there were numerous sunsets
on tax credits and credits that may be good and important
to the public. He encouraged members to review the next
report [2019] because some sunset dates may need to be
extended. He hoped the legislature would be able to get rid
of more [indirect expenditures] in 2019. The bill included
[and would remove] four indirect expenditures. He
anticipated the bill would bring in over $350,000 in
revenue to the state treasury.
Co-Chair Foster noted there were other individuals
available for questions.
Co-Chair Foster MOVED to ADOPT Amendment 1, 30-LS0121\A.1
(Nauman, 2/26/18) (copy on file):
Page 2, line 19:
Delete "2018"
Insert "2019"
Page 2, line 20:
Delete "2017"
Insert "2018
Co-Chair Foster explained the amendment would update the
effective dates of the bill on page 2, line 19. It would
update the effective date of Section 1 (tax on gambling
activities) to January 1, 2019 and amended the effective
date for the remainder of the bill to July 1, 2018.
There being NO OBJECTION, Amendment 1 was ADOPTED.
9:09:09 AM
Co-Chair Seaton highlighted the two new zero fiscal notes
from the Department of Commerce, Community and Economic
Development and one new zero [note: fiscal note was
indeterminate] note from the Department of Revenue (DOR).
Representative Wilson believed the change in revenue
estimated at an increase of $350,000 to the state would
impact DOR (fiscal note OMB Component Number 2476).
Co-Chair Seaton replied in the affirmative. He detailed the
DOR fiscal note reflected zero in expenditures with an
indeterminate range in revenues. He elaborated the revenue
was anticipated to increase by $339,500 in FY 19,
decreasing to approximately $314,150 in FY 24.
Representative Wilson explained she wanted the record to
reflect that the revenue was positive.
Representative Thompson noted that one of the reasons the
DOR fiscal note was indeterminate was the department had no
idea how much difference the bill would make in the cruise
ship gambling tax credits (any potential revenue from the
specific credit was unknown).
9:11:28 AM
Co-Chair Seaton MOVED to REPORT CSHB 96(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 96(FIN) was REPORTED out of committee with a "do pass"
recommendation and with two new zero fiscal notes from the
Department of Commerce, Community and Economic Development
and one new indeterminate fiscal note from the Department
of Revenue.
9:12:03 AM
AT EASE
9:12:51 AM
RECONVENED
HOUSE BILL NO. 273
"An Act extending the termination date of the
Marijuana Control Board; and providing for an
effective date."
9:13:05 AM
CRYSTAL KOENEMAN, STAFF, REPRESENTATIVE SAM KITO, thanked
the committee and relayed Representative Kito's apologies
for his absence. The bill would extend the Marijuana
Control Board for six years. She appreciated the time the
committee took to address issues raised in the audit. She
noted the licensing program and industry were new.
Vice-Chair Gara noted that Representative Wilson had asked
in a previous meeting what could be done to get General
Fund (GF) money back [that had been used to get the program
running] that would have been paid by license fees if the
industry had been up and running. He asked for detail.
Ms. Koeneman referenced discussion about the $1.5 million
[in state funds] used to help startup the program so the
initial licensees were not burdened with additional costs.
She did not believe there was any issue from the industry
or the board to have the money paid back. She explained
that the money could not be contained in the fiscal note.
She noted it was possible for the House Finance Committee
to put intent language in the language section of the
operating budget.
Representative Wilson stated that all of the money
currently generated went there [to the General Fund]. She
stated that revenue was tracked for other boards. She
surmised the industry had probably started paying the money
back. She stated that all of the taxes earned on revenue
businesses made went into the General Fund, but it was not
necessarily tracked separately. She wanted to make sure the
industry was paying its way and remarked that it was not
tracked the same as other boards. They had to make sure
whatever came in went out.
9:15:58 AM
Co-Chair Foster listed other individuals available for
questions. He asked the Department of Commerce, Community
and Economic Development (DCCED) to address the fiscal
note.
ERIKA MCCONNELL, DIRECTOR, ALCOHOL AND MARIJUANA CONTROL
OFFICE, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT (via teleconference), reviewed the fiscal
impact note from DCCED. The note illustrated that if the
board was discontinued, the Alcohol and Marijuana Control
Office (AMCO) would eliminate eight positions and the
associated costs of approximately $1.66 million. The
positions included three investigators, one records and
licensing supervisor, two occupational licensing examiners,
one administrative assistant I, and one criminal justice
technician I.
Representative Wilson asked how AMCO planned on making up
the $532,800 in the current budget that it would not be
receiving in the following year. She wondered how many more
licenses the agency would need. Alternatively, she
questioned whether the agency would be close to having the
same $1.6 million at the end of FY 19.
Ms. McConnell answered that the board continued to receive
new license applications. It was difficult to specify the
precise number of needed licensees to maintain self-
sufficiency. She expounded that the different license types
submitted different licensing fees. The board was on track
to becoming self-sufficient in FY 20 or soon thereafter.
The board felt confident that ending state unrestricted
general fund (UGF) support was acceptable in FY 20 with the
board evaluation of licensing fees at that time.
Representative Wilson asked for verification that the board
counted on licensing fees to hire positions. Whereas,
marijuana taxes went through DOR to the General Fund. She
surmised the board was not involved in tracking tax
revenue.
Ms. McConnell answered in the affirmative. The board
received licensing and application fees but did not receive
any support from marijuana taxes.
Vice-Chair Gara referenced that the state had been paying
for the board's operation costs with GF and marijuana tax
revenue. He asked if the board intended to reimburse the
state.
Ms. McConnell replied in the affirmative.
Vice-Chair Gara surmised the reimbursement to the state
would come from surplus or increased license fees in future
years.
Ms. McConnell answered it would be a combination of more
licenses and an evaluation of whether license fees needed
to be adjusted. The board was clear on the legislative
intent that the money would be repaid.
9:20:29 AM
Co-Chair Seaton asked if the department believed there was
adequate legislative intent that the fees would not be
reduced to pay the direct cost only of the operating board
until the money had been repaid to the GF. He wondered if
there needed to be more specific legislative intent to
allow the collection and use of fees to cover past
operations. He asked whether the board had authority to use
excess fees to repay GF.
Ms. McConnell responded there had been clear legislative
intent in FY 17 that the legislature wanted the $1.5
million to be repaid. At the same time, the board had been
authorized to repay any excess dollars as carry forward to
help stabilize the board's revenue for the next couple of
years. She did not have the experience to know whether it
was appropriate to recommend for the legislature to add
intent language in the FY 19 budget. She believed the
legislature's intent was clear and the board would be
working over the next several years to repay the startup
costs. She communicated that the board was amenable to the
addition of intent language in the operating budget if the
legislature felt it appropriate to do so.
9:22:54 AM
Representative Guttenberg asked if the board's reading of
the intent of the legislation that the board would pay back
the startup costs with fees. Ms. McConnell replied in the
affirmative.
Co-Chair Seaton MOVED to REPORT HB 273 out of committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
HB 273 was REPORTED out of committee with a "do pass"
recommendation and with one new fiscal impact note from the
Department of Commerce, Community and Economic Development.
[Note: additional discussion on HB 273 took place after the
following "at ease."]
9:24:17 AM
AT EASE
9:28:44 AM
RECONVENED
Co-Chair Seaton made clarifying remarks to HB 273. He noted
the committee had been advised there should be a language
amendment in the budget describing the legislature's
intent. He noted there had been two different amounts
mentioned in terms of what the board would repay the
General Fund. He asked the Legislative Finance Division to
address the committee on the subject.
LACEY SANDERS, ANALYST, LEGISLATIVE FINANCE DIVISION,
relayed that AMCO had received several years of
appropriations. The initial appropriation had been a
supplemental made in FY 15. Each year after that AMCO had
received GF. She noted that earlier in the meeting it had
been stated there was a $1.5 million repayment of GF. She
clarified that the total GF received from FY 15 through the
FY 19 governor's proposed budget was $5.4 million. If some
type of language was added to the operating budget, there
would need to be clarification on which amount needed to be
repaid. There had been conversation about how it could be
done - one way to address the issue was to amend the carry
forward language allowing AMCO to carry forward the
receipts. The carry forward language had been included to
allow AMCO to ramp up as it brought on licensees. The
language could be amended to limit the amount to the amount
of the board's annual operating budget. She explained the
change would cover the board for a year and anything that
lapsed could be counted towards the GF repayment.
Co-Chair Seaton stated that generally on professional
boards there was a fee structure supporting the operation
of the board. He explained that typically fees were reduced
if they were bringing in more than needed for the board's
operation. There needed to be some clarification that any
excess revenue from fees would go towards repaying GF prior
to making a reduction to fees.
Representative Pruitt appreciated the conversation. He
shared that he had chaired the DCCED budget subcommittee
right after the board had been established. He agreed the
intent had been for the board to repay all of the costs it
took to get the program up and running. He noted the
process was taking four to five years. He agreed
clarification needed to be made to provide a clear
understanding that extra fees would go towards recouping
the state's cost for establishing and regulating the board.
He reasoned the board had to appropriately manage its fees
to do so. He continued that the board could not just lower
fees once it had attained the amount needed to cover its
operations for a year.
9:33:48 AM
Representative Ortiz asked what the agency's annual budget
amount was. He supported the intent of the previous
speaker; however, he wondered if passing the intent
language would put the board and industry in a difficult
position to meet the obligations.
Ms. Sanders replied that she did not have the precise cost
breakdown on hand. She would have to consult with the
department first. The intent would be for the agency to
have an entire year of operating revenue, which should not
limit the agency. She elaborated that the agency could
carry forward an entire year of revenue annually, to ensure
it would be covered if revenue came in lower during a given
year.
Vice-Chair Gara stated was discussing different legislative
intent options. He noted the legislature always hoped
someone would follow legislative intent. One option would
be to put the language in a bill, which he believed would
be sloppy. He hoped to receive something in writing -
potentially in regulation - from the board outlining how it
intended to pay back the funds in a way that did not harm
the industry. He did not believe including the language in
a bill was the right approach.
9:36:04 AM
Representative Guttenberg was thinking about the operation
of AMCO. He asked if the operation of the Marijuana Control
Board was similar to the Alcoholic Beverage Control (ABC)
Board operation.
Ms. Sanders believed the Marijuana Control Board was the
only board with carry forward language. The ABC Board was
lapsing a small amount and did not have carry forward
language.
Representative Guttenberg pointed out that AMCO was one
agency with two boards, operating with different sets of
rules. He stated, "we just need to do the right thing at
the end of the day."
Representative Wilson clarified it was not the
legislature's intent to implement a time limit [on the time
it took the board to pay the state back]. She elaborated
that the board would not lower the fees until its
obligation was met (e.g. in five to ten years). She noted
Ms. McConnell had said the board could pay back the $1.5
million. She reasoned the board could pay back the $5.4
million, which would just take longer. She clarified the
legislature was not expecting the board to pay the state
back in one year. She added there would be more license
applications and there were more in the queue at present.
Vice-Chair Gara asked to hear from the department.
Ms. Sanders relayed that the legislature would work with
the department to make sure the language was clear and did
not hinder the agency.
Vice-Chair Gara believed it would behoove the board to
provide the legislature with a written document specifying
a timeline that did not harm the industry.
Co-Chair Foster noted there was some intent language to
consider.
HOUSE BILL NO. 267
"An Act requiring the release of certain records
relating to big game hunters, guided hunts, and guided
sport fishing activities to municipalities for
verification of taxes payable; and providing for an
effective date."
9:39:43 AM
TIMOTHY CLARK, STAFF, REPRESENTATIVE BRYCE EDGMON,
introduced the legislation. He expressed regrets from the
bill sponsor for his absence. He explained the bill would
give municipalities that levy taxes or fees on fish and
game guiding in their jurisdictions access to hunt or sport
fishing records submitted by guides to state agencies. He
elaborated it would provide municipalities with a cross
referencing tool in order to confirm with the various
guiding outfitters who may or may not be in compliance with
their local tax obligations. He emphasized that all such
information released by state agencies to municipalities
would remain confidential under law. He reported that the
bill sponsor believed the tool was important for
municipalities, given that the state had pushed costs to
municipalities in recent years. The sponsor believed
municipalities should have every resource to ensure they
were receiving the revenues due to them according to their
local ordinances.
9:41:40 AM
Representative Wilson asked about the current process. She
used a hunt as an example. She asked if someone had to
register with the municipality. She asked how the bill
would change behavior.
Mr. Clark believed the procedures for guides varied from
municipality to municipality. He used the Lake and
Peninsula Borough as an example and detailed the borough
levied a modest $3 per person, per day tax. The borough's
ordinances (copy on file) had varied stipulations about
reporting to the borough the extent of their hunting or
sport fishing activities within the borough jurisdictions
and making their tax payments according to the backup
reporting also provided to municipalities.
Representative Wilson assumed the Lake and Peninsula
Borough believed people were hunting without registering
with the borough. She surmised the borough hoped the
records would show more people who had utilized the
borough's jurisdiction. She asked if the intent was to then
allow boroughs to bill guides who were identified.
Mr. Clark replied there were around 130 guiding operations
registered with the borough, but during any given season,
because of the borough's large size and the number of
outfitters coming and going over a period of months during
a summer season, it was impossible to keep tabs on each
outfitter. He furthered that because the reports provided
to the state stipulated when and where an outfitter's
guiding activities had taken place, the information could
be used as a cross reference for the boroughs. If the
borough noticed an outfitter had been carrying on
activities in the borough's jurisdiction, the borough could
contact the outfitter to ask them to come into compliance
with its taxing requirements.
Representative Wilson asked whether there was anything in
the bill specifying what would happen if the information
did not remain confidential.
Mr. Clark answered that the bill required confidentiality
to be maintained by the municipalities. Elsewhere in
statute there were criminal consequences for a breach in
confidentiality. He believed the offence was a Class A
misdemeanor in criminal code.
Representative Kawasaki asked why hunt and fish records
were currently confidential.
9:45:41 AM
Mr. Clark answered that for many guides, where they
operated and even the time of year they were in a certain
area was almost proprietary. He elaborated that certain
businesses may categorize an area as a hot spot - a place
where a guide could be more confident in enjoying success
on behalf of their clients. Businesses did not like to
advertise successful locations to competitors.
Representative Kawasaki understood. He asked about the
penalty. He asked if municipalities that would receive the
information would keep it confidential.
Mr. Clark answered in the affirmative. He used the Lake and
Peninsula Borough as an example, which had a "lock and key"
chain of custody procedure that kept the borough well
within the confines of the law and confidentiality
requirements.
Representative Kawasaki referenced testimony from some
guides (copy on file) that the bill would allow for an
equal playing field for guides who were operating
responsibly and paying the fees for customers they were
taking out. He did not know whether the bill specifically
asserted there were guides who were not acting in the same
way. He asked if there was any other hammer available to
municipalities for individuals not operating under the law.
Mr. Clark deferred the question to municipal officials as
circumstances varied by borough. He noted that the Lake and
Peninsula Borough asked for copies of the records that
guides supply to the state, but they had no way to enforce
it. He explained the practice was almost on a voluntary
basis. Based on the large areas many boroughs encompassed
and the large number of businesses conducting business,
there was no way they could economically go after a large
number of delinquent taxpayers.
9:49:22 AM
Vice-Chair Gara understood the information needed to be
shared in order for municipalities to obtain the revenue
due to them. He did not see any language about sharing of
hotspots. He was concerned about the issue. He shared that
one of his favorite fishing spots had become overrun by
people. He asked for verification there was nothing in the
bill specifying that a person needed to release exact spots
they fished.
Mr. Clark deferred the question to the Department of Fish
and Game (DFG). He stated that the specificity, in terms of
locations reported by guides, was greater than naming a
single river. He expressed confidence in the ability for
state and borough employees to adhere to confidentiality
requirements.
Representative Tilton referred to Mr. Clark's mention of
DFG. She mentioned discussion about the logbook program,
which was about to sunset. She noted there had been
difficulty reinstating the program the last time because of
some of the information that had to be provided. She asked
about the departments concerns including what information
it was supposed to share.
Mr. Clark deferred the question to the department. He noted
that the logbook requirement was in regulation. He believed
the sunset pertained to fees and other aspects associated
with the log book program.
9:52:05 AM
SARA CHAMBERS, DEPUTY DIRECTOR, DIVISION OF CORPORATIONS,
BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, relayed that
the Department of Commerce, Community and Economic
Development (DCCED) oversaw the Big Game Commercial
Services Board, which spoke to the hunting records side and
contained the same hotspot issue as fishing. The hunt
records, as defined in statute and regulation, required
very specific locations to be disclosed, which in laymen's
terms may equate to a hotspot. She explained that hunt
records were designed for a purpose other than the purpose
being discussed in the bill. The information was important
to troopers and wildlife biologists. As the bill was
written, everything in the hunt record could be disclosed,
including contact information for clients and a great deal
of specific information.
Ms. Chambers referenced past discussion in the House
Resources Committee and the DCCED fiscal note that
reflected the development of a report that would take the
information pertinent to the municipal tax requirement and
work with the municipalities to discern what information
was wanted. The department could then quickly provide a
report on demand. The capability would be efficient and
would not burden anyone with concerns about hotspots and
client information. While the bill would reflect the
municipalities' ability to request hotspot information,
DCCED hoped to establish a compromise that would be less
costly for municipalities.
Representative Tilton hoped to hear from DFG as well. She
had worked on legislation related to the saltwater guide
logbook, which had been a contentious issue.
Co-Chair Foster replied he would request for DFG to attend
the next meeting.
Representative Pruitt recalled that in 2014 the legislature
had passed legislation allowing the state and
municipalities to share tax records. Prior to the law
change, the entities could not communicate. He remembered a
situation where the state had known a car rental agency was
not paying city taxes, but the state was not allowed to
communicate it to the city. Statute had been passed to
address the issue. He asked if the current bill was needed
because they were not talking about a tax from the state
level; it was a tax at the borough level. He thought
perhaps because there were not two sets of taxes and
municipalities were just seeking records, which was not
currently authorized under statute.
Mr. Clark agreed.
Representative Pruitt noted that operators had to fill out
separate sets of information for the state and borough. He
asked if the bill would allow operators to file one report.
9:56:45 AM
Mr. Clark replied his understanding was that the bill would
streamline the paperwork for guides. He used the Lake and
Peninsula Borough as an example and explained the borough
did not necessarily require guides to fill out the
borough's own hunting report, but it requested copies of
the report submitted to the state. He did not believe the
boroughs had any actual legal authority to force them to
provide the copies. Guides who had been in compliance would
be saved from duplicating and copying of a season's worth
of activities. He believed the paperwork for the borough
would be reduced to something resembling a one-page tax
filing document.
Representative Pruitt asked if there was an estimate of
revenues lost to the borough due to bad actors who were not
complying with requests.
Mr. Clark responded that the one estimate he had heard was
from the Lake and Peninsula Borough finance officer was
approximately $50,000 to $100,000 in lost annual revenue.
The amount was significant for boroughs with an annual
budget around $3 million.
Representative Pruitt asked there were other boroughs or
municipalities that would be using the tool provided by the
bill.
Mr. Clark answered that the City of Yakutat, the City of
Sitka, the Kodiak Island Borough, and the Aleutians East
Borough may all benefit from the legislation. He was not
familiar with the local taxes in these locations. Fully
determining the beneficiaries was a work in progress.
10:00:12 AM
Representative Kawasaki referenced bad actors known [to
municipalities] and no other way to get the information. He
pointed to bill language specifying that the information,
including hunt records, could be requested by other state
agencies; and federal and other law enforcement agencies.
He asked if it did not include the Lake and Peninsula
Borough's code compliance office that could already ask for
the information if they knew who they were looking for.
Mr. Clark clarified he did not want to characterize every
guide operation delinquent in local taxes as bad actors. In
some cases, operators may be unaware of borough
requirements or their season could be busy, and things
could get put by the wayside. He believed the question
would best be addressed by a borough official. His
understanding was there was currently no real practical way
for boroughs to chase down the significant number of
operations that may be delinquent in their local taxes. In
some cases, boroughs simply heard from someone in town that
a guide flew into town that week with six clients, spent
seven days, and flew out again. Under the scenario, a
borough official may realize the borough had never heard
anything from the guide. Often, in those circumstances, the
borough made a call to the guide and most often the guides
were happy to comply with tax requirements.
10:02:33 AM
Ms. Chambers replied that the section of statute pertaining
to hunt records and transporter activity reports had been
interpreted to mean any state agency and any law
enforcement agency as defined in statute as a police-type
of law enforcement. Municipal code enforcement had not been
interpreted to fall underneath the definition, which she
believed was the reason for the bill. The department
published a list (online) of the guides who were qualified
to operate in every guide-use area, which was available to
any municipality to help educate. Municipalities were able
to download the information and reach out to each guide to
make sure they know about the municipal requirements. She
remarked that the Lake and Peninsula Borough had an IRS-
style tax form. The board's understanding was that guides
would still have to fill out DCCED's hunt records and the
tax form that included the number of hunters and nights
stayed. The department had not been informed by any
municipality that they were planning on filing the
information on the guide's behalf. From the guides'
perspective the paperwork would not change unless a
municipality was anticipating changing their system as a
result of the bill.
10:04:28 AM
Representative Wilson there was a way for a guide to mark
the municipality when they filled out a hunt application.
She was uncertain about the full record going [to the
municipality]. She believed the only thing the
municipalities needed to know was that someone was hunting
in their jurisdiction who would be required to fill out the
paperwork. She asked if it was something that could already
be done when filing an application [to DCCED].
Ms. Chambers answered that the forms were all adopted
through regulation. She affirmed it was possible for the
board to amend the forms. The department already input the
law information into a database to make the work of federal
and state agencies easier. The department was proposing,
via its fiscal note, to work on the database more to be
able to generate a report along those lines. The idea was
to provide information that would help municipalities and
not provide information that was irrelevant.
Representative Wilson surmised the intent of the department
would be to include some type of associated fee to make the
change cost neutral.
Ms. Chambers replied in the affirmative.
10:06:22 AM
KATHIE WASSERMAN, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL
LEAGUE (AML), reported that AML was in favor of the
legislation. As more cuts to municipalities and transfer of
duties resulted from state issues, municipalities needed
every tool possible in order to maintain finances at a
sufficient level in order to operate in an effective and
efficient way. She stated the bill was a tool that helped
minimalities. She knew there had been numerous questions by
legislative committees about what happened if municipal
employees divulged confidential information. She did not
understand that concern. She did not know what had happened
to make so many people distrustful of municipal government.
Municipalities all dealt with taxation and she had never
heard of things happening where someone had inappropriately
talked about those sorts of things. She acknowledged it had
probably happened in municipalities and the state alike.
She stressed the bill provided a tool to enable
municipalities to get their finances back to a more
operable point. Currently, in large boroughs such as Sitka,
there was no way to know who flew into town in any
particular year. She elaborated that new people came from
the Lower 48 to hunt - there was no way for the borough to
know the information without getting some records. She
believed the primary thing the boroughs needed was what had
been charged for a particular trip. She noted it had been a
problem for the City of Pelican as well. She knew the issue
was a problem throughout Alaska. She asked the committee to
pass the legislation.
Representative Wilson thought the bill was more about
fairness than budget cuts. She reasoned that some guides
were paying what they should, while others may know and
decide not to pay. She thought the bill was needed
regardless whether the budget had been cut because it
pertained to revenue that could be utilized by boroughs.
Ms. Wasserman believed Representative Wilson was right. She
did not know if the issue was more about fairness, but it
was certainly part of the issue. From the standpoint of
municipalities, it was about the lack of ability to receive
tax money that was owed. She agreed that from the
perspective of responsible taxpayers, the issue was about
fairness.
Representative Wilson spoke to confidentiality and believed
the concern was not only about the particular bill. She
expounded that the state took in a substantial amount of
information for all sorts of things. She believed
confidentiality needed to be considered with each piece of
legislation to determine how far the information provided
by the public would go.
Ms. Wasserman believed Representative Wilson was right. She
underscored the information needed to be laid out very
clearly in order for everyone to understand upfront what
they were providing and what would be used.
10:10:32 AM
SUSAN EDWARDS, FINANCE OFFICER, LAKE AND PENINSULA BOROUGH,
KING SALMON (via teleconference), spoke in support of the
bill. She testified that the need for the borough to know
location came down to guide-use areas. She detailed that
some guide-use areas were split between boroughs. One of
the issues the borough dealt with was determining which
borough the guide was operating in. Currently it was easy
for a guide to say they were not operating in a particular
borough. The borough would like to know with certainty
where the guide was operating. The borough was in a very
large roadless area and the finance department had a staff
of two. Therefore, having the information to verify who was
operating in the borough and who was not, was very
important.
Representative Wilson asked about the issue of being in two
boroughs at the same time. She asked if the borough's tax
applied to a person hunting within the borough's
jurisdiction or only when a person took an animal within
the borough's jurisdiction.
Ms. Edwards answered that the tax applied when an animal
was taken. Guides were required to register in a guide-use
area, which was public information. The borough monitored
the information and reached out to guides who had not
registered with the borough and were hunting in a split
game-use area. Many guides were forthcoming about where
they had been hunting in a game-use area and a few were
not. Without any way of verifying what the borough was
being told - it was put in a situation of not knowing the
veracity of the information they were told. When someone
told the borough, they had been just across the border, it
could be true that the individual may not have known their
precise location; it may be an honest mistake on the
guide's part. The information provided by the bill would
offer verification and clarity.
10:14:32 AM
Representative Wilson asked for the mechanism the borough
would use to collect the tax. She wondered if the mechanism
was in place or the borough was just hoping that once it
knew a guide had been operating in the borough that they
would send the payment.
Ms. Edwards replied that the borough knew who was hunting
in the game-use areas that were fully or in part in the
borough's jurisdiction. The borough reached out to all of
the guides operating in its jurisdiction and asked them to
register. The borough asked for a quarterly tax filing,
which was a single sheet of paper. Additionally, it had
created a self-calculating form, meaning the guides only
had to fill in the number of people and the days in the
field. The borough had worked to make filing taxes as easy
as possible for guides. She stated the issue came down to
being able to verify the information the borough was told
and to identify guides who were unaware they were operating
in the borough, unaware of the need to register, or were
not reporting at all.
10:16:20 AM
NATHAN HILL, MANAGER, LAKE AND PENINSULA BOROUGH, KING
SALMON (via teleconference), testified in support of the
legislation. He spoke to numerous reasons for the borough's
support. The borough's code required professional hunting
and fishing guides to register with the borough and pay a
$3 per day, per person use tax when operating in the
borough's boundaries. The borough imposed the tax for the
same reason it imposed a severance tax. Like commercial
fisheries activities, the borough taxed other commercial
activities. The taxes applied on all borough lands. The
commercial fisheries could access processor data to verify
fish tax revenue, unlike the current status with guide
activity reporting. Without access to state guide activity
report, the borough had no way to verify whether the
activity reported (to the borough) was accurate. The
borough did not have a way of knowing who was operating and
whether or not they were in the borough's jurisdiction. He
stated situation was inequitable for guides operating in
compliance and was unfair to the residents of the borough
who relied on the resources and generated taxes. He
referenced letters from other operators that the bill would
result in the reduction of paperwork. He thanked the
committee for the opportunity to testify in support of the
legislation.
Co-Chair Foster CLOSED public testimony.
Co-Chair Foster asked committee members to provide any
amendments by Friday, March 2.
Representative Wilson wanted clarity on someone hunting in
two different areas. She used the Lake and Peninsula
Borough as an example where a hunter may be operating in
its jurisdiction or under Kenai's jurisdiction. She
referenced testimony that the tax was based on where an
animal had been taken. She provided a scenario where Kenai
had the same tax as the Lake and Peninsula Borough. She
asked if a person was hunting in both jurisdictions for
five days whether the tax for the full five days would go
to Kenai if the animal was killed in its district.
Alternatively, she wondered if part of the tax would be
paid to the Lake and Peninsula Borough if the guide had
been operating within its jurisdiction for part of the
time. She noted it was easy if a person was all in one
borough.
Mr. Clark responded that he was not familiar enough with
the borough's finance officers on the ground practice. He
deferred to Ms. Edwards from the Lake and Peninsula
Borough.
Ms. Edwards answered that the hunt reports specify the
location where an animal was taken. Part of the rationale
behind the tax was a severance tax. The basis was to tax at
the point where the animal was harvested.
Representative Wilson asked for verification that if she
was on a five-day hunt it would not matter that a guide had
traveled back and forth between two jurisdictions. She
surmised the person would be charged based on where the
animal was taken.
Ms. Edwards answered in the affirmative.
Representative Ortiz thought the situation was unworkable.
He thought the revenue should go to wherever the business
was located. He did not know how it would work if a hunter
took an animal right on the border [between two
jurisdictions]. He reasoned the hunter may not know the
location. He thought a workable policy would be revenue
collected wherever the person had their business.
Ms. Edwards answered that the majority of guides operating
in the borough were not borough residents. There were a
significant number of guides that were not state residents.
She considered the severance aspect and explained the
borough viewed the issue as people coming from outside and
taking borough resources. For the small amount of taxes
they had, it was more than reasonable to have money coming
in from the outside whether taking fish from the water,
minerals from land, or hunting animals.
10:24:14 AM
Representative Ortiz asked if the businesses themselves did
not have a local entity.
Ms. Edwards answered that the businesses were not local.
She elaborated that the businesses ranged from Montana,
Texas, West Virginia, Tennessee, Anchorage and Mat-Su. The
businesses had no presence within the borough.
Co-Chair Seaton asked if a hunt that was unsuccessful did
not have to pay anything. He thought the tax was based on
participation per day as well as a severance tax. He hoped
that if people were using the borough to conduct business
that the borough could collect the daily fee.
Ms. Edwards answered that hunt reports were submitted
whether the hunt was successful or not and were specific as
to the location the guide had been operating in. She
assumed the report was submitted for purposes of game
management and biological data. While the tax pertained to
area the animal was taken, it was also about the area the
operator had been hunting. In talking to guides, the
borough tended to err on the side of the guide. There were
fairly detailed maps and there was very little crossing
back and forth of boundaries. Given that the borough was
the size of West Virginia, places where most of the guides
hunt (that were known to the borough) were well within the
borough.
Mr. Clark clarified that Ms. Edwards had been providing the
answers.
10:27:41 AM
Vice-Chair Gara did not have a concern over his earlier
question related to enforcement. He stated that absent some
major expense on enforcement, guides would report their
activity within the proper borough. He knew for a fact on
one state record animal that guides would not necessarily
report the exact location an animal had been taken,
although it would be within the appropriate jurisdiction.
He reasoned if the state had a real concern about making
sure reporting was 100 percent accurate in every case, it
would have to spend more money on enforcement than it would
ever recoup.
Representative Wilson was concerned about the amendment
deadline. She noted that she and Co-Chair Seaton had
received different answers to the same question about how
the tax was determined. She wondered if hearing from DFG
would help. She thought that a person was required to take
a GPS moose hunting to record where the animal was taken,
which was a way for DFG to know where resources were being
taken. She mentioned the guide area and asked how much the
state was asking for guides to report. She agreed there may
not be many areas where guides crossed over between borough
boundaries, but she did not know how many times it could
happen. She wondered if the state would need more
information than where the animal had been taken. She
thought it could end up being much costlier than
anticipated. She requested to hear from DFG before
amendments were due.
Co-Chair Foster asked Mr. Clark to get something in writing
from DFG prior to the next committee hearing on the bill.
He held off on the amendment deadline.
Representative Guttenberg noted that the bill provided a
tool to track what was taken and who was in the borough. He
stated that the process was already in place.
Co-Chair Seaton clarified that the state was not charging
any fees. The bill would merely allow municipalities to
access existing state records for their own enforcement of
their own tax system; the information would be kept
confidential. The bill would not implement any regulations
or impose any new conditions on where an animal was taken.
He provided a scenario where a guide told the borough it
had only had three people hunting for a week, the borough
could verify the guide had reported [to the state] that it
had five to seven clients in the area on seven different
occasions. The bill would allow the boroughs to verify
reports being made for tax purposes. He was less concerned
than if the state was imposing some new requirements on
guides or hunters.
10:32:26 AM
Co-Chair Foster believed the bill was simply seeking to
access records by municipalities. He tentatively maintained
the amendment deadline of Friday, March 2.
Representative Wilson added that DCCED staff had testified
the department was considering a different type of
application where an applicant would mark their location.
The department was not necessarily looking to disclose the
entire report to municipalities. There could be some
changes or possible regulations. She requested to receive
the information [from DFG] prior to Thursday.
Mr. Clark added that it was not the sponsor's intent that
the information released to municipalities be limited in
any way. The sponsor was confident in the professionalism
of the municipalities and their ability to keep
confidential information confidential. He believed DCCED
should share the confidence.
HB 267 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the agenda for the following
meeting.
ADJOURNMENT10:34:38 AM
The meeting was adjourned at 10:34 a.m.